#2021-15, May 7, 2021

PPP Funds Exhausted for Most Lenders; CDFIs and MDIs Still Accepting Applications

This week, the Small Business Administration (SBA) announced that Paycheck Protection Program (PPP) funding has been exhausted and that the PPP application portal stopped accepting applications yesterday for loans from most lenders.  The agency said that approximately $8 billion remaining in congressionally mandated funding for PPP loans made by designated “community financial institutions,” which includes minority depository institutions (MDIs) and community development financial institutions (CDFIs).

SBA also noted that approximately $6 billion is being held in reserve for loan applications that were submitted but are subject to hold codes that have not been resolved.  Loan applications that have not yet received an SBA loan number have not been approved and banks with applicants in this situation may consider referring clients to MDIs and CDFIs.

Fed Issues Payments System Access Proposal

The Federal Reserve this week issued proposed guidelines the central bank will use when evaluating requests for master accounts with the Fed or access to other services.  In recent months, a number of fintech firms and non-bank financial services companies have requested access to the payments system and the Fed proposal seeks to clarify what businesses are eligible and which ones are not.

Under the proposal, the Fed will consider:

• Whether the institution is legally eligible to maintain an account at a Federal Reserve Bank and has a “well-founded, clear, transparent and enforceable legal basis for its operations.”
• Whether the provision of an account and services would present or create undue credit, operational, settlement, cyber or other risks to the Reserve Bank, or to the broader payments system.
• Whether the provision of an account and services would create undue risk to U.S. financial stability.
• Whether the provision of an account and services would create undue risk to the economy by facilitating illicit activities.

If the Fed grants an access request, “it may impose (at the time of account opening, granting access to service, or any time thereafter) obligations relating to, or conditions or limitations on, use of the account or services as necessary to limit operational, credit, legal, or other risks posed to the Reserve Banks, the payment system, financial stability or the implementation of monetary policy or to address other considerations,” according to the proposal.  Comments are due 60 days after publication in the Federal Register.

To read more, click here.

Senate May Vote on Repeal of OCC “True Lender” Rule

The Senate may consider a resolution as early as next week under the Congressional Review Act (CRA) to repeal the Office of the Comptroller of the Currency’s (OCC) rule establishing a test to determine when a bank is considered the “true lender” of a loan made in a partnership with a nonbank entity.  Under the CRA, Congress needs only a simple majority vote to repeal federal agency rules finalized within the previous 60 days it is in session.  CRA resolutions also prohibit an agency from reissuing a substantially similar rule.

While MBA and other lending trade associations have expressed concerns with the True Lender rule, repealing it with the CRA could eliminate legal certainty for borrowers, lenders and investors and leave the interpretation up to courts in various jurisdictions.  We will continue to follow this issue closely and provide additional information in future Washington Updates.